updated 09:05 am EDT, Mon April 14, 2008
Blockbuster Bids Circ City
Blockbuster today made a surprise, unsolicited bid for Circuit City. The offer would provide $6 per share and equate to $1 billion, or approximately 54 percent more than Circuit City's current value. The offer is meant to seize on the increasing unity between media and technology and would create a "game-changing retail concept," according to Blockbuster chief Jim Keyes. Circuit City has not yet formally responded to the offer but is said not to have offered the "due diligence" necessary to provide a full assessment of Circuit City's worth; doing so could boost the offer to $8 per share, or more than $1.3 billion.
The move would potentially rekindle hopes for Circuit City, which has been rapidly losing marketshare in the face of aggressive competition from Best Buy as well as online stores. Blockbuster touts the offer as evidence of its newfound health, which saw it turn around from a $49 million loss at the start of 2007 to a $30 million profit a year later. The video store operator has taken dramatic steps to turn around its business by cutting jobs and stores as well as exploring digital options, including a network media hub and in-store kiosks to load up portable media players.
A successful Blockbuster takeover would also mark one of the first unions between a general electronics shop and a store offering video rentals, shifting away from the more typical buy-only offerings found at most larger competitors. The proposal doesn't immediately point to rentals becoming an option at Circuit City, though rentals form the core of Blockbuster's business and are likely to see some form of integration.